Callisto Pharmaceuticals Announces Major Strategic Initiative for Guanilib in GI Disorders

Callisto Pharmaceuticals, Inc. (AMEX: KAL; FWB: CA4), a developer
of new drug treatments in the fight against cancer and
gastrointestinal disorders and diseases, announced today a major
strategic initiative to develop Guanilib, its guanylate cyclase C
receptor (GCCR) agonist. Guanilib will be developed primarily for
chronic constipation and constipation-predominant irritable bowel
syndrome (IBS-C).

"This is a major new development for Callisto," said Dr. Gary S.
Jacob, Chief Executive Officer of Callisto. "The value for products in
this class was recently set in a partnership deal between Microbia
Inc. and Forest Laboratories (NYSE: FRX). That deal provided upfront
and milestone payments to Microbia of up to $330 million - and that
was for essentially a 50/50 profit split for the US only. We have the
only other compound in this class. We were the first company to
develop GCCR agonists based on the natural human intestinal hormone
uroguanylin, and our patent on Guanilib issued in May, 2007, giving us
a proprietary position with our drug. We are now behind Microbia but
we hope to have a compound that is best in class."

As part of its initiative, Callisto announced plans to file an IND
for Guanilib in the first quarter of 2008, and initiate a Phase 1
trial shortly thereafter. Callisto is also shifting the immediate
development focus from gastro-inflammatory diseases to chronic
constipation and IBS-C. "Callisto will devote at least half of its
available funds exclusively for Guanilib development," said Dr. Jacob.
"In addition to our cancer products, we now aim to become a leading GI
drug development company. Drugs in these markets have very large sales
potential, and we will build the organization and devote the resources
needed to realize this ambition."

About Guanilib

Guanilib (also called SP-304) is a potent analog (synthetic
molecule) of uroguanylin developed by Callisto scientists, and is
proprietary to Callisto. Guanilib has been demonstrated to be superior
to the natural hormone, uroguanylin, in its biological activity,
protease stability and pH characteristics. The compound is currently
undergoing pre-clinical animal safety studies as a treatment for
chronic constipation and IBC-C. The compound is not absorbed
systemically and demonstrates a very good safety profile. Callisto
plans to initiate clinical trials of Guanilib in early 2008.

About Chronic Constipation and Irritable Bowel Syndrome

Chronic constipation is a very common condition. Up to 26 million
Americans suffer from the condition and of these about 5 million have
a severe problem. The prevalence is similar in other developed
countries. Patients with chronic constipation often experience hard
stools, straining during bowel movements and not enough bowel
movements during the week. People with chronic constipation can
experience serious discomfort which adversely affects their ability to
work and their quality of life.

Up to one sixth of adults experience Inflammatory Bowel Syndrome
(IBS), a condition marked by disturbed bowel function and abdominal
pain. IBS patients can have three different sets of symptoms;
diarrhea-predominant (IBS-D), constipation-predominant (IBS-C) and
mixed or alternating disorder (IBS-M). About 35% of patients suffer
from IBS-C. IBS accounts for 12% of adult visits to primary care
physicians in the US.

There are currently few therapies available for chronic
constipation or IBS-C. The main product in this market, Zelnorm from
Novartis Pharmaceuticals (NYSE: NVS), was withdrawn due to
cardiotoxicity in April 2007 in the US. In 2006 Zelnorm sold about
$561 million with about a 30% growth rate at the time of withdrawal.

About Callisto Pharmaceuticals, Inc.

Callisto is a biopharmaceutical company focused on the development
of new drugs to treat various forms of cancer and gastrointestinal
diseases. Callisto's drug candidates include two anti-cancer agents as
well as a drug for gastrointestinal disorders. One of the Company's
lead drug candidates, Atiprimod is presently in a Phase II clinical
trial in advanced carcinoid cancer patients, a neuroendocrine tumor,
and in a Phase I/IIa human clinical trial in relapsed or refractory
multiple myeloma patients. Another anti-cancer drug, L-Annamycin, is
being developed as a treatment for forms of relapsed or refractory
acute leukemia, a currently incurable blood cancer. L-Annamycin is
currently in a Phase I clinical trial in adult relapsed or refractory
acute lymphocytic leukemia, and in a Phase I clinical trial in
children and young adults with refractory or relapsed acute
lymphocytic leukemia or acute myelogenous leukemia. L-Annamycin, a
member of the anthracycline family of proven anti-cancer drugs, has a
novel therapeutic profile, including potential activity against
multi-drug resistant tumors and significantly reduced cardiotoxicity,
or damage to the heart, compared to currently available drug
alternatives. Callisto also has a proprietary drug Guanilib in
preclinical development for gastro-intestinal disorders. Callisto is
also listed on the Frankfurt Stock Exchange under the ticker symbol
CA4. More information is available at http://www.callistopharma.com.

Forward-Looking Statements

Certain statements made in this press release are forward-looking.
Such statements are indicated by words such as "expect," "should,"
"anticipate" and similar words indicating uncertainty in facts and
figures. Although Callisto believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no
assurance that such expectations reflected in such forward-looking
statements will prove to be correct. As discussed in the Callisto
Pharmaceuticals Annual Report on Form 10-K for the year ended December
31, 2006, and other periodic reports, as filed with the Securities and
Exchange Commission, actual results could differ materially from those
projected in the forward-looking statements as a result of the
following factors, among others: uncertainties associated with product
development, the risk that products that appeared promising in early
clinical trials do not demonstrate efficacy in larger-scale clinical
trials, the risk that Callisto will not obtain approval to market its
products, the risks associated with dependence upon key personnel and
the need for additional financing.